Lessons learned and unlearned

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I’ve just about had it with all the whining and complaining (which, I admit, is ironic considering the complaining I’m doing here). Events in Washington and in many of our state capitals prove, over and over again, just how corrupt and ineffectual the system is. And the degree to which money has coopted the system. And just how far we are from a functioning democracy.

And so we complain. And whine. And bitch. And point the finger at everyone. Except ourselves that is.

We seem oblivious to the connection between money and the output we receive. We tolerate a system of campaign finance that is certain to be a corrupting influence. And we keep electing people to offices despite their proven track record of ineptitude. And despite their venile behavior. And cruel words.

To make matters worse, many of us have allowed ourselves to be corrupted by a naive, self-destructive ideology. We willingly accept as true absurd claims made by people who are interested in nothing other than their own self-interest. We seem to have lost the traits of skepticism and discernment. We seem to have lost any sense of how a democracy is supposed to work.

And so we are where we are.

But this too shall pass, I believe. Eventually, we shall come to a more enlightened era, when people realize the inherent dangers of unconstrained greed and power. When people understand the work that’s necessary to build and sustain a society that yields the best quality of life for everyone. When people recognize the absurdity in calling people winners or losers. When people no longer react favorably to acts of cruelty.

I don’t know when that day will come. I may be gone from this earth by the time it comes. But it will come.

In the meantime, we should accept responsibility for that which we have created. And stop pointing the finger. The system we have is the system that is the predictable, inevitable product of that which we value. And are willing to tolerate.

Here we go again. Somehow, someway, we forget the maxim that has survived the test of time: What goes up, can go down.

In the first decade of this century, many of us thought, despite overwhelming historical evidence to the contrary, that real estate values could only go up. Millions of foreclosures and bankruptcies later, we discovered we were wrong. We had to relearn the lesson the hard way. But it seems we didn’t learn the lesson at all.

I read in this morning’s newspaper how people are spending more and even dipping into their savings because they feel wealthier due to rising stock and real estate prices. Indeed, the savings rate has fallen of late, just when interest rates are showing the urge to rise. Bad timing.

People are borrowing more money to buy stocks. And they’re taking expensive vacations beyond their means. And going deeper into debt to pay for colleges they can’t afford. And buying more house than they need.

An overwhelming majority of investors think the stock market will be higher in six months. They might be right. But they might be wrong. Are they prepared to be wrong? Many aren’t.

Reason would dictate you’d sock more money away during the good times — for rainy days, college, retirement, or simply to have a safety net. But by now it’s pretty obvious many of us live for today and aren’t all that concerned about tomorrow.

History tells us it’s highly likely, at some point, the stock market will fall quite a bit from its current lofty levels. It could be tomorrow. It could take longer. But it surely will fall.

There is a good chance real estate values, at least in certain areas, will fall, too.

If any of these inflated values are sustainable, it will be in only nominal terms, that is, without taking inflation or currency values into account. People are acting that neither is a significant risk. I fear they’ll be mistaken on one or both counts. Indeed, it’s hard to imagine any scenario that sees a stronger dollar in the long term. And we know inflation and interest rates are already below historical norms, suggesting the risk to the upside is not immaterial.

The timing and sequence of events are impossible to predict. A material decline, in real terms, in the value of equities and real estate is easy to predict.

But either way, it’s only a prediction. And that’s the point: the future is unknown. All we can know for sure is there will be bumps in the road. At some point, what went up will go down.

Warren Buffett, the most successful investor in the world in my lifetime, is famous for saying, “You only find out who is swimming naked when the tide goes out.”

When asset values fall, or inflation rises, or the dollar falls, or interest rates rise, as these things will most surely do at some point, we’ll discover who was swimming naked.

Save yourself the embarrassment, Vera. Act prudently. Never assume the sun will shine forever just because it’s shining today. And don’t forget life’s hard lessons, particularly this one: What goes up, can go down. And try not to be surprised or unprepared when it does.

Many people are shopping today. Data show that some of them haven’t yet paid off the bills from last year’s shopping binges. But it won’t stop them from shopping more.

In the short-term, this is good for the economy and, by extension, for the rest of us. The long-term is a different story. But, as Americans are prone to do, we’ll deal with that if and when it becomes a problem.

I don’t need anything and I don’t know anyone who does, so I won’t be shopping today. It occurred to me, however, that that’s a problem. Why don’t I know anyone who needs anything?

Perhaps I know too few people. Or perhaps my sphere of personal interactions is too small.

I don’t feel the need to shop, but I do feel like I should have to shop. I feel like I should know someone who needs something.

In general, I think we’re either givers or takers. Most of us aren’t one or the other entirely; we’re a mixture of both. I have seen, however, people who seem to be 100 percent takers. I don’t find them to be attractive and have no desire to emulate them. But perhaps I’m more like them than I care to admit.

What I’ve learned over the course of my life is giving matters. It helps keep us grounded. It helps us maintain proper perspective. It nourishes our souls and makes us better people.

I used to think staying away from the stores was a good thing. That not spending was meritorious. But I’m no longer so sure.

I was struck in the face with this reality last week. I was surprised that I was surprised. I thought I had a good grasp on how culture had changed. But it turn out it’s changed more than I had thought. That realization was very unsettling.

Last week I discovered that the word “wrong” had become obsolete. Well, perhaps not entirely. But almost. Continue reading →